The Federal Government has secured the copyright licence for the Aboriginal flag after negotiations with Harold Thomas, who designed the flag in 1971.

Under the $20 million deal, the flag can now be reproduced without a fee and follow the same protocols as the Australian flag, bringing an end to the ongoing saga.

"I hope that this arrangement provides comfort to all Aboriginal people and Australians to use the flag, unaltered, proudly and without restriction," Thomas said, according to SBS. "The flag represents the timeless history of our land and our people's time on it. It is an introspection and appreciation of who we are.

"It draws from the history of our ancestors, our land, and our identity and will honour these well into the future."

Gunditjmara woman and clothing designer Laura Thompson started a campaign to "Free the Flag" in 2020 after discovering WAM Clothing held exclusive international rights to sell clothing with the Aboriginal flag.

Her campaign drew widespread support from all sections of the community.

Thomas granted licences to Flagworld Pty Ltd for the use of the design in manufacture and marketing of the flag and to WAM Clothing for use of the design on clothing, which netted him $20,000 and royalties over a period of 10 years.

WAM Clothing is owned by two white people, one of whom was the owner of Birubi Art, the former clothing licence holder that was liquidated after it was found to have been misleading customers over the authenticity of the Aboriginal art it was selling.

The business has sent cease and desist letters to Aboriginal-owned clothing businesses, the AFL and NRL, and the AFL has been denied permission to use the flag in this weekend's Indigenous round, sparking outrage around the country.

Minister for Indigenous Australians Ken Wyatt said it was important that all Australians could use the flag with dignity and respect.

"Over the last 50 years we made Harold Thomas' artwork our own – we marched under the Aboriginal flag, stood behind it, and flew it high as a point of pride," he said. "In reaching this agreement to resolve the copyright issues, all Australians can freely display and use the flag to celebrate Indigenous culture.

"Now that the Commonwealth holds the copyright, it belongs to everyone, and no one can take it away."

Prime Minister Scott Morrison said it was a landmark agreement, struck just in time for Australia Day.

"We've freed the Aboriginal flag for Australians."

Carroll and Richardson Flagworld will remain the exclusive licensed manufacturer and provider of Aboriginal flags.

Any profits the government makes from Flagworld's sales will go to NAIDOC. Thomas will retain moral rights over the flag.